Which one correctly shows the sequence of earnings capitalization process? forec
ID: 2565597 • Letter: W
Question
Which one correctly shows the sequence of earnings capitalization process?
forecast of I/S -> forecast of annual earnings for business life --> determination of the cost of equity ---> Calculation of present value of future earnings.
determination of cost of equity -> forecast of annual earnings for business life --> forecast of I/S ---> Calculation of present value of future earnings.
Calculation of present value of future earnings--> determination of cost of equity -> forecast of annual earnings for business life --> forecast of I/S
determination of cost of equity -> forecast of annual earnings for business life -->Calculation of present value of future earnings --> forecast of I/S.
Explanation / Answer
it is option D
Since the earnings capitalization process in which the value of the company will be found by forecasting the future earnings and discounting using company’s cost of equity